IRS to Modernize How Amended Tax Returns Are Filed

When an error is made on your 1040 tax form, you can file an amended tax return, known as the 1040X form. The process in which to do this is considered archaic by most and must be modernized. As of right now, you can only file the 1040X amended tax form by way of a paper form which has to be manually processed by the IRS once they receive it. This seems a little ridiculous since everything else, including the original 1040 tax form can be filed electronically, but it’s true. It won’t be this way for long though if the Treasury Inspector General for Tax administration (TIGTA) has anything to do with it.

The Treasury Inspector General for Tax Administration (TIGTA) issued a report earlier this year based on an audit that was completed regarding amended tax returns from previous years. According to the taxbook.com, “TIGTA found that the IRS needs to modernize its processing for amended tax returns to reduce erroneous refunds, processing costs, and taxpayer burden. During the audit, TIGTA found with 44 accounts they reviewed had erroneous refunds issued on at least 22 of the accounts (that’s 50 percent). This is why TIGTA recommends in their official treasury report that “in order to reduce erroneous refunds, processing costs, and taxpayer burden, the IRS could revise Form 1040, U.S. Individual Income Tax Return, to allow for corrections to original tax return filings and expand e-filing to include amended tax returns.” They estimated that the IRS could have potentially saved more than $17 million in processing costs during the year of 2012 if electronic filing had been an option for taxpayers.

“TIGTA has also recommended that the Commissioner, Wage and Investment Division, revise Form 1040 to enable taxpayers to amend their original tax return using this form, expand e-filing to include amended tax returns, and conduct a review of the 44 amended tax returns TIGTA identified for which potentially erroneous refunds were issued to determine the proper tax liability.” According to the treasury report, the Commissioner, Wage and Investment Division has responded back with an official memo and explain that it has been a long term goal to produce an effective electronic amended form. They have set a goal that at the end of the 2014 tax year; they will have their IT department look into the cost of making this form electronic as well as changing the appearance of it, which is completely dependent on the available funding for the IT department. This funding decision is out of the IRS’s control though. Additionally they reviewed the 44 accounts in question and agree that there were processing issues with the 22 accounts but disagree that they were processed incorrectly.

**Remember, the IRS limits the amount of time that you can ammend a return**